Tim Hortons aiming to keep growth going

Sunday

May 5, 2013 at 12:01 AMMay 5, 2013 at 2:31 PM

Despite its many restaurants and frequent TV commercials, Tim Hortons still has an identity problem of sorts in central Ohio. It dates to when the coffee-and-bakery chain was spun off from Wendy's several years ago, a move that returned the company's top offices to Oakville, Ontario, and removed the major connection with the iconic local name.

Mary Vanac, The Columbus Dispatch

Despite its many restaurants and frequent TV commercials, Tim Hortons still has an identity problem of sorts in central Ohio.

It dates to when the coffee-and-bakery chain was spun off from Wendy’s several years ago, a move that returned the company’s top offices to Oakville, Ontario, and removed the major connection with the iconic local name.

“People are still surprised to know that our U.S. headquarters is based in Columbus,” said spokeswoman Brynn Burton.

Not only is the U.S. headquarters based here, but local operations are driving a nationwide expansion that has seen the chain increase its number of restaurants by at least 10 percent each of the past two years.

“Tim Hortons remains one of the leading players in the competitive North American quick-service restaurant market,” Morningstar analyst R.J. Hottovy wrote in a research report last week.

Hottovy called Tim Hortons a “dominant brand” for a variety of reasons, including a cohesive franchisee system.

Tim Hortons has a 125-person staff at offices near I-270’s Sawmill Road interchange on the Dublin line.

The company plans to open between 70 and 90 restaurants in the United States this year after launching 98 restaurants in 2012. In Columbus, the company has built several “ nonstandard” locations, such as the store inside Riverside Methodist Hospital that opened in 2010.

The U.S. headquarters staff also is leading a remodeling effort to reposition its mostly franchisee-owned U.S. stores as Cafe and Bake Shops.

“We have gained a solid foothold into the U.S. market, which promises to be our next wave of growth,” said Paul House, interim president and CEO of the overall company.

In the United States, where Tim Hortons operates in 11 states, it has only a fraction of the number of stores it has in Canada, where it is one of the leading national brands. The company has 144 stores in Ohio, with 84 of that number in central Ohio, making Columbus the chain’s third-largest market, behind Detroit and Buffalo.

The chain was founded in 1964 by Tim Horton, who played for more than 20 years in the National Hockey League, mostly with the Toronto Maple Leafs. By the time Horton died in an auto accident a decade later, the chain had grown to 40 stores.

Today, Tim Hortons is growing in both the United States and Canada during a rough patch for the quick-serve industry. Sales at stores open at least a year grew 4.6 percent last year in the U.S. and 2.8 percent in Canada.

“We’ve had tremendous growth over the last few years,” said Mike Meilleur, the executive vice president in charge of Tim Hortons’ U.S. operations. “We’ve just crested 800 restaurants in the United States. We have a big focus on western New York, Ohio, Michigan, as well as Maine.”

Last year, Tim Hortons zoomed from No. 22 to No. 5 in the quick refreshments and service and decor categories of Zagat’s annual survey of U.S. fast-food chains.

Also last year, the Canadian chain was fourth in Technomic’s ranking of the fastest-growing limited-service chains in the United States, with unit growth of 19 percent, year over year.

In Columbus, Tim Hortons is known for its cafe-like restaurants, good coffee and community spirit. The company has marketing partnerships with the Columbus Blue Jackets, Ohio State University and the Columbus Zoo & Aquarium, among other organizations, Meilleur said.

“I think (the success) stems from the group of restaurant owners we have here and across the country,” Meilleur said.

Lonnie Waldrop of Powell is one of those owners. He was a regular Tim Hortons customer years before leaving a corporate job to buy the first of three of the company’s locations in the Columbus market about a decade ago.

“I think we are convenient, fast, but a little upscale, too,” said Waldrop, who owns a Tim Hortons near Polaris and two in Westerville — one on the OhioHealth campus. “We have customers who come in every day.”

Some of his guests feel so at home that they take their dirty dishes to the kitchen. “Customers feel like it’s their place,” Waldrop said.

Tim Hortons is growing faster in the United States than in Canada. But sales at stores open at least a year slowed last year at both its U.S. and Canadian stores. Last year’s 4.6 percent growth in the United States was down from 6.3 percent in 2011.

Some analysts question whether a spotty economic recovery and restaurant saturation in the United States make it the wrong growth market for the Canadian chain.

Activist shareholder Highfields Capital Management, a Boston hedge fund, wants to speed up the company’s steady growth with aggressive, debt-fueled stock buybacks and a scale-back of its U.S. expansion plans, according to Reuters.

Other investors want to know when Tim Hortons will name a permanent chief executive. House returned to the president and CEO posts, from which he retired in 2008, when Don Schroeder left in 2011.

Meanwhile, restaurant analyst John Gordon, principal at Pacific Management Consulting Group in San Diego, wonders whether slow-growing Tim Hortons is being outflanked in the United States by a re-energized Dunkin’ Brands. “Without a doubt, Dunkin’ is growing faster in the United States,” Gordon said.

But Meilleur, Burton and Waldrop see only opportunities.

“In 2013, we plan to make balanced, targeted investments to support our continued growth and help address the impact of a challenging economic environment,” Burton said. “ The board has a high degree of confidence in our existing strategic plans, and we remain focused on executing those strategies.”

Franchisee Waldrop envisions buying a fourth Tim Hortons in the next year or two.